Question 3 (25%): Economics of Health Externalities. Scientists have discovered new vac- cines for disease: A and B. The private and social demand curves for
Question 3 (25%): Economics of Health Externalities. Scientists have discovered new vac- cines for disease: A and B. The private and social demand curves for each vaccine are: (2%. = 50 P (1) Qt.\" = 100 - P (2) 12:10.1. = 502P (3) (23m, 120.711 2P (4) Both vaccines have a marginal cost of $10 and the market is perfectly competitive. 1. (5%) Which vaccine faces a more elastic demand? 2. (5%) Is there an externality for vaccines A and B? 3. (15%) Calculate the social loss for both vaccines (round to integer). Interpret the result. [Hint Draw the graphs and calculate the triangle area.]
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